VRX Bausch Health Cos

By Michael Rapoport and Jacquie McNish 

Valeant Pharmaceuticals International Inc. filed its long-delayed annual report and further overhauled its board Friday, resolving the company's looming danger of debt default and positioning it to aim for a fresh start after months of concerns over its accounting and business practices.

But the Canadian drugmaker disclosed a variety of new and broadened regulatory investigations, in addition to the Securities and Exchange Commission probe it already faces -- indicating it isn't out of the woods yet.

Valeant said its danger of default was "cured in all respects" by its 10-K annual report filed with the SEC early Friday. The report, originally due in February, had been delayed as Valeant sorted out its financials in the wake of an internal investigation into its now-ended relationship with mail-order pharmacy Philidor Rx Services LLC. The failure to file violated Valeant's borrowing agreements, and the company's banks and bondholders could have accelerated the company's payments on billions of dollars in debt if it hadn't filed the report by late May.

Investors sent Valeant's stock lower Friday, with shares falling 5.7% to $33.23. The stock has plunged more than 85% from its high last August.

Valeant reaffirmed that its internal investigation hadn't found any significant financial problems beyond a previously planned restatement of past earnings, after the company found it had booked $58 million in revenue through Philidor too early. The restatement dented its 2014 net income by about $33 million, or 9 cents a share, the company said, and its first-quarter 2015 net income by $24 million, or 7 cents a share.

Valeant also said its loss for the fourth quarter of 2015 was wider than it initially reported in March. The fourth-quarter loss was $385.9 million, compared with the previously reported $336.9 million for the quarter and a restated profit of $512.5 million in the year-ago fourth quarter. Valeant posted a 2015 loss of $291.7 million, compared with a restated profit of $880.7 million for 2014.

Valeant also outlined investigations from state regulators in North Carolina and New Jersey that hadn't previously been disclosed. North Carolina is investigating Valeant over its pricing decisions and patient assistance programs, and New Jersey is investigating Valeant's relationship with Philidor. The Wall Street Journal has reported Philidor used aggressive tactics to get insurers and pharmacy-benefit managers to pay reimbursements for its often high-price drugs.

In addition, federal prosecutors in New York and Massachusetts, who were already investigating Valeant over patient assistance and pricing, are now also looking at the Phildor relationship and information Valeant provided to Medicare and Medicaid Services about drug discounts.

The 10-K also shed some light on the transactions with Philidor that led to the restatement. The filing said they included "fulfillment of unusually large orders with extended payment terms and increased pricing, " as well as an emphasis on delivering product before Valeant purchased an option to buy Philidor, a move that changed the timing of when Valeant could record Philidor-related revenue. Valeant said its procedures governing "nonstandard revenue transactions" such as the Philidor transactions need improving.

Valeant said it intends to hire more staff to "enhance" its accounting and finance capabilities, to address problems with its "tone at the top" and pressure on executives to hit performance targets. The company has alleged "improper conduct" by Howard Schiller, its former financial chief, and Tanya Carro, its corporate controller who was placed on administrative leave. Mr. Schiller has said he did nothing improper. Ms. Carro and a representative for Mr. Schiller couldn't immediately be reached for comment Friday.

Separately, Valeant nominated three independent directors for election to its board, as the company looks to change the tone among its top brass. The new nominees are Argeris Karabelas, a former drug-industry executive and a partner at life-sciences venture-investment firm Care Capital LLC; Russel Robertson, a BMO Financial Group executive and former auditor; and Amy Wechsler, a New York dermatologist.

The move follows Valeant's appointment earlier this week of Perrigo Co. CEO Joseph Papa as its new leader, replacing Michael Pearson. It also comes on the heels of other board changes, including the appointment of major Valeant investor William Ackman as a director in March.

If Valeant's proposed slate of directors is elected at the company's annual meeting June 14, only two directors who were on Valeant's board a year ago, Robert Ingram and Robert Power, will remain and the board will shrink to 11 members from 14. Five current directors -- including Mr. Pearson and Mr. Schiller, who refused a request from Valeant's board to resign as a director -- won't stand for re-election.

Besides Mr. Papa, Mr. Ingram, Mr. Power, Mr. Ackman and the three new directors, the company's slate includes four other independent directors named to the board in the past year -- Frederic Eshelman, Stephen Fraidin, Thomas Ross Sr. and Robert Hale, who will represent big Valeant investor ValueAct Capital Management LP as ValueAct's president, Mason Morfit, leaves the board.

The 10-K filing and board changes cap a busy week for Valeant, which also included Mr. Papa's appointment and a hearing Wednesday where Messrs. Pearson, Ackman and Schiller were grilled by senators upset at the company's past practice of dramatically boosting the prices of some drugs. Mr. Ackman signaled at the hearing that board changes were afoot and promised Valeant would take swift action to reduce prices on some drugs.

Anne Steele contributed to this article

Write to Michael Rapoport at Michael.Rapoport@wsj.com

(END) Dow Jones Newswires

April 29, 2016 13:15 ET (17:15 GMT)

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